Talking Points
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Despite some turbulent action elsewhere in the FX markets, USD/JPY has gone virtually nowhere as the range this week in the pair is a little over 100 pips. Yesterday, in fact, was the narrowest range in almost a month. Such a sharp contraction in near-term volatility is usually a reliable signal and precursor to a meaningful directional move given the inherent mean reverting tendency of volatility. US employment data should be a clear catalyst for volatility expansion. Our game plan after the data will be to watch how the exchange rate reacts around this week’s range extremes. A convincing break of 116.86 will be seen as a negative and should open the way for a more serious decline while traction over 118.00 will be taken as a bullish development.
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USD/JPY Daily Chart: February 6, 2015
Charts Created using Marketscope – Prepared by Kristian Kerr
Key Event Risk in the Week Ahead:
LEVELS TO WATCH
Resistance: 117.98 (WTD high ), 118.90 (trendline)
Support: 116.86 (WTD low), 116.10 (trendline)
Strategy: Sell USD/JPY
Entry: Sell USD/JPY if spot closes the day below 116.86
Stop: Daily close above 117.40
Target: 115.00
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter at@KKerrFX.
